Is Fair Trade Fair?

I have recently begun to drink Rainforest Alliance coffee from my local, corner coffee shop. I am doing this primarily because I am trying to be more aware of the products that I consume and to make an effort not to be compliant in what I would deem as unfair trade. I have been surprised however, to find out that a number of people whom I respect, do not agree with the practice of purchasing ‘fair trade’ products. They do not argue against ‘fair trade’ because they don’t want to treat suppliers fairly, but because the economic argument says the practice achieves the exact opposite effect.

One of the books that we read in a recent seminar was written by Julie Clawson and titled Everyday Justice: The Global Impact of Our Daily Choices. (Downers Grove, Ill.: IVP Books, 2009.) She did a wonderful job of looking at a number of social justice issues and putting them into understandable, tangible and personal terms. The first of chapter of the book is called Coffee-Fair Trade and the Daily Latte. The main crux of her argument is that many of the local farmers do not see much of the money we pay for our coffee because most of the coffee goes through marketing organizations or (non-) government monopolies that keep a large chunk of it. She advocates that ‘fair trade’ is about giving dignity to the local workers by putting more control and money into their hands, often by eliminating or minimizing the role of the middle men. She rightly references God’s commands in Malachi 3:5 and James 5:4-5 to treat labourers fairly. This seems to be a good argument and one which I can support. The problem however, is whether the economics agree.

One thing I came to learn when discussing this issue with others, is that the term ‘fair trade’ seems to have various connotations. There are a number of fair trade labelling companies and organizations which provide certification that commodities and products are produced under certain conditions. It seems however, that some of these groups simply increase prices and use the certification fees for marketing purposes. The economic argument is that, while such practices may benefit fair-trade farmers, they distort market prices and have unintended consequences on non-fair trade farmers. The higher ‘fair trade’ prices lead to increased production, which floods the market, thereby bringing down prices, negatively affecting non-fair trade farmers. Further, as sales shift to ‘fair trade’ products, the demand for non-fair trade commodities decreases, additionally exacerbating the downward spiral of prices. Those who provide fair trade products benefit from higher prices (which are kept artificially high according to ‘fair trade’ standards), while those who do not meet the criteria end up being hurt by the increased supply and decreased demand that leads to lower prices.

It would seem however, that there is more to the story than simply higher prices. A ‘fair’ system should be about much more than only pricing. In many cases a marketing organization or government monopoly takes a large chunk of the revenues. A fair trade system would enable farmers to get more of the revenues. This could be done without necessarily increasing prices, although the marketing organization or government would need to agree to lower revenues in order for this to work. In addition to guaranteeing minimum prices (the cost of production plus decent living wage), fair trade should also include non-monetary factors such as fair treatment of workers, environmentally sustainable practices and direct trade between suppliers and buyers.

When discussing these types of issues, the economic argument normally deals solely with price and quantity and does not take the human factor into proper consideration. It is often argued that trade can only be fair if each party is getting the maximum monetary benefit. Monetary considerations are obviously very important, but they are not the only considerations. As a Christian, I need to consider what God says about how we are to treat those with whom we do business; Also, operating in a free market, I am free to do business with whomever I please and under any conditions with which we both agree, including both monetary and non-monetary ones. The Golden rule tells us to “do unto others as we would have them do it to us” and we would do well to keep this in mind as we consider the consequences of not just our monetary, but also our personal relationships.

About Me

After 20 years in the real estate industry, including 17 years in China, I returned to North America to complete my masters degree. I am currently pursuing my Ph.D. (ABD) in ethics with a focus on mission, vision and values. Read More…

About Me

After 20 years in the real estate industry, including 17 years in China, I returned to North America to complete my masters degree. I am currently pursuing my Ph.D. (ABD) in ethics with a focus on mission, vision and values. Read More…

You can contact me directly

I am based in downtown Toronto and you can reach me by Email or by telephone (416) 948-6994.